Chapter 1How to have a Stress-Free Bankruptcy
Chapter 2What is Bankruptcy
Chapter 4What is the procedure?
Chapter 6What can Bankruptcy do for you?
Chapter 8Is Bankruptcy Bad?
Chapter 9What does Bankruptcy cost?
Chapter 10Can I file without my spouse?
Chapter 12Do I lose anything?
Chapter 13Does Bankruptcy "Ruin my Credit"
Chapter 14Can I keep bills off my bankruptcy
Chapter 16What about the Credit Union?
Chapter 18What about my car?
Chapter 19What about my House?
Chapter 20When do creditors stop bothering me?
Chapter 22Joint Accounts with Parents
Chapter 23When do I stop paying creditors?
Chapter 24Gas, Electric & Phone Bills
Chapter 26What Bankruptcy won't solve
Chapter 27Chapter 13 Debt repyament Plans
Chapter 28Will I be able to get credit again?
Chapter 29Bill Consolidation Loans
Chapter 30Bill Consolidation
Chapter 31Wage Assignments, Deductions and Levies
Chapter 32Student Loans
Chapter 33Can I get rid of Taxes
Chapter 34NSF Checks, Traffic & Parking Tickets
Chapter 35Surrendering Real Estate & Time Shares
Chapter 36Business Bankruptcy
Chapter 37Professional Persons
Chapter 38Do you ever "Not Get" a Discharge?
The main causes are loss of jobs, illness, and bad luck. Other causes are: using credit cards for regular living expenses, and not paying them off in full every month; car accidents; getting ripped off by used car dealers; co-signing for unreliable people; and divorce.
Let's talk about each of these causes briefly.
Loss of JOB
If you lose your job, and qualify for unemployment compensation, the amount of money you receive may be less than your regular paycheck. Sometimes, unemployment compensation runs out, or you do not qualify, and this means that your income is zero. While you are unemployed, you can file a Chapter 7 case, but you are prohibited from filing under Chapter 13 unless you have a regular source of income.
It may be to your benefit, especially if you usually earn $45,000 yearly, or more, to file a Chapter 7 before you get back to work. This is because there is an income test in Chapter 7 cases, meaning you can have too much income to do a Chapter 7. This usually comes into play over $45,000, in urban areas like Chicago. If you are not a higher income person, this timing is not so important.
You may not want to not file a Chapter 7 case unless you are already back to work, for several reasons. First, your bad luck may not be at an end. If you are out of work, you probably don't have medical insurance. If you become ill after you have filed a bankruptcy, and run up a bunch of medical bills, you will have to pay them, because you will have used up your chance to do a bankruptcy already. Secondly, if you are not working, your money is short, and if you fall behind in your rent or utilities, or your car insurance lapses because you didn't pay it and you wreck your car, you will have already used up your 6 year chance to file a bankruptcy and start fresh. Thirdly, when you aren't working, no on can garnish your wages, and you probably don't have any savings that they can attach, so what is the point of doing a bankruptcy until you are back to work?
The reason for doing a bankruptcy is to start fresh. You cannot start fresh if you are still out of a job. Once you return to work, a bankruptcy can be filed in as little as one day, to protect you from creditors, so wait until you are back to work to worry about getting rid of your bills. You may run up some more before that happens!
Bankruptcy can discharge medical bills not covered by insurance. Many people are forced to seek relief from medical bills they cannot pay, because either they have no insurance, or their insurance did not pay all the bills. Medical bills can be devastating. A discharge in bankruptcy will eliminate all bills up to the date of filing the case. If you have a chronic illness, or have to get more medical treatment, it may be a good idea to wait until you are sure that you will have no more uninsured medical bills to pay, before you file a bankruptcy. Your bankruptcy lawyer can advise you on this.
Most people who work for a living have little or no savings. They need to spend their paycheck on current expenses, and there is very little to save. Any excess income is spent on entertainment and on buying consumer goods. If there is any break in the income, this is a disaster. Having a car break down, and missing work for a week because of it, can sometimes put a person behind in their bills so that it is impossible to catch up. Usually, it will take more than a week, though. Plant closings are an example of bad luck that is forcing many Americans to totally restructure their lives, and makes it impossible to meet their credit obligations. Loss of a job is a major cause of bankruptcy.
Another variation on the loss of a job, is reduction of pay. The employee is still working, but the pay has been reduced. This happens when a company breaks a union, or when employees have to voluntarily accept pay cuts in order to prevent the company from going out of business altogether. I have had many employees who were making $15 to $30 per hour suffer pay cuts down to $6 to $9 per hour, and this makes it impossible to live at the same standard as when the pay was double. Something has to go, and especially if there is only one person in the family working, bankruptcy is the only solution to pay cuts. It enables the family to go back to just paying its regular living expenses, instead of paying for a lot of luxury items on credit.
Illness has already been discussed as another form of bad luck. Sometimes the bad luck of other people will cause a person to have to get relief from creditors by filing under the bankruptcy laws to discharge their debts. A recent phenomenon is bankruptcy caused by drug or alcohol use. A person may be married to someone who has bad habits that cause them to default on joint debts, or to use their charge cards to support an irresponsible life style. The other person is stuck paying for the results of the addiction. I have seen mothers and fathers who have had to use all their savings, and all their credit, in trying to pay for treatment and defense of their drug addicted children. Finally, they have spent all their savings, borrowed beyond their credit limit, had their property stolen by the addict child to sell for drug money. Then they can no longer meet the payments on the loans they have taken to help their child, and bankruptcy is the only alternative to wage garnishments and lawsuits.
Death of a person that was contributing to the household expenses can make it impossible for survivors to pay creditors. I have seen many people who otherwise had good credit, but had sudden deaths in the family, and had to go further into debt in order to pay the funeral expenses of their loved ones. Not only the expenses of death of their relatives, but the time off from work, and travel expenses to distant home towns, account for more than a few bankruptcies.
Salaries in the last 10 years have not kept pace with expenses. The cost of apartments, cars, food, gasoline, and clothing, goes up 10% or more each year, but salaries do not. The standard of living is actually going down in this country, thanks to things like foreign cars, and "Reaganomics." Many people, such as steelworkers, have had to take lower paying jobs. Many factory jobs are not available due to shifts to non-union states, and to foreign countries, so former factory workers may have to take lower paying jobs in retail, just to have a job. When you have to take a lower paying job, you may have to get rid of your debt with a bankruptcy
Problem: Bill and Sally have been married for 20 years. Bill recently lost his job in middle management, and is now working at half his former salary, driving a limousine. Sally had an operation, and since there was no insurance, owes $8,000 in unpaid medical bills. She used to be a secretary, but knows nothing about computers, and can only work for $6.50 an hour as a receptionist. They can't pay for their credit card debt that used to be easy for them to pay.
The Geraci Law answer: Chapter 7 or 13. Underemployment and illness will require Bill and Sally to readjust their life style. A Chapter 7 to get rid of their credit card debt, and avoid lawsuits and garnishments, will help them start fresh, or a Chapter 13 to give them a no interest repayment plan.